Three Houses And Two Snakes

There were three houses on an important road in a busy city. Each house was occupied by a family of six to eight persons. They all had friendly relations and enjoyed living in the locality. Things were going smooth and they were indeed happy days.

It rained heavily one night and the area was flooded. Water did not enter the houses as they were fortunately slightly above the road level. Raining stopped in the morning and everyone was able to get on with their regular routine.

The heavy rain and flooding made lives of many animals in the area miserable. The plight of the humans received a lot of coverage in the media, but nobody thought of these animals. Most of the animals lost their regular living place and hideouts. A snake so displaced entered house number 1. It made its place in the small hole in the front yard of the house. It became accustomed to the new surroundings and decided to stay there for the future. It was moving around freely in the compound area as and when it wanted, found out sources of required food also. It told itself that the new place was better than the previous place. It slowly started venturing inside the house as well and really felt at home. It would go inside at night and sometimes sleep next to someone in sound sleep. It moved around freely without hesitation. It was indeed very happy now!

All the members of the family living in the house continued to go about their lives in the same way as before, for they did not know there was a snake as an additional member of the family in their house. Ignorance was bliss indeed.

*****

The lady of house number 2 was talking to a friend who was passing her house on some urgent work. Though invited to come inside the house, the friend could not come in because she was in great hurry. Both understood the time constraint and hence discussed important issues across the gate. They discussed for only some fifteen minutes when the friend again realised she was getting late on the urgent work. She bid goodbye and left.

Just as the lady of the house was entering the house thinking about the issues discussed with her friend, she heard her calling again. She returned to her position inside the gate as the friend had already taken her position outside the gate. 

"In the midst of all our discussion I forgot to tell you something very important. When I was passing in front of your house yesterday I saw something moving in the bushes in your compound. It was on the jasmine bush. It looked like a snake, but I am not at all sure. I really don't know. I don't want to tell a lie but I felt it advisable to let you know about it. Snakes are dangerous, you know", she said and again remembered her urgent work. She left hurriedly on her errand.

Lady of the house went inside the house and duly informed all other members of the family. Everyone was now worried. The rope used for drawing water from the well, pipe used for watering the plants, skipping rope used by the children for exercise, and anything else slightly curved that they saw began to look like a snake. The hissing of the cooker on the stove, air gushing through the water pipe before water actually came in them, and snoring of the grandmother reminded the hissing of the snake. They had not actually seen the hissing of the snake, but they had certainly heard about snakes doing hissing noise in great detail. 

The peaceful living of the family was now shattered. They were scared beyond explanation. "What to do now?" was the question haunting them now.

*****

A cousin of the snake in house no. 1 was also in trouble due to the rain. It also lost its original place to live. While flowing in the rain water on the street, the water current pushed it towards house no. 3. The snake was very wise, grabbed the opportunity and somehow managed to enter the house. It found a place to hide in the bottom of the small tree in the compound. It also succeeded to find food and place to move around. It decided to settle in this house for the future.

While it was on the evening stroll in the compound one day, one of the residents saw it while he was entering the house through the gate. He told other members of the house. They all had a emergency meeting and discussed about the possible plans to get rid of the snake. Each member of the family gave their own suggestion to deal with the snake. Some of the suggestions were:

• To closely study the snake and find out whether it is poisonous or not. If it is non-poisonous, they need not worry much about it.
• To nominate one of the family members to attend a "Catching Snakes and dealing with them" training program, to be in readiness to deal with the consequences of any untoward happening.
• To make a "First Aid Box" and keep all items required to deal with snake bites so that it comes in literally handy in case of such eventuality.
• To designate one of the family members as "Snake Coordinator" and update him with any further suggestions that may occur to family members later on. The coordinator should also issue "Weekly Bulletin" covering all emergent issues.
• To find out the mobile number of Chikka Nagaraja, famous snake catcher of Bangalore and note the number on the wall of the house prominently, so that he can be called for emergency help. 
• The family member also informed that the well-known Snake Nagaraja, who had 15 years experience in catching snakes had died on Saturday, 29th April, 2017 in Jigani while catching a big Cobra. Though he had caught thousands of snakes in his career and had a world record, he finally died by snake bite. The family member also quoted the well known sentence: "He who lives by the sword dies by the sword". He who lived by catching snakes unfortunately died while catching a snake, (Now Chikka Nagaraja had taken the place of the original Nagaraja and was about to beat the snake catching record of the original Nagaraja). 
• He also suggested all members of the family to Google about "Snake catcher Nagaraja" for knowing further details.

It was unanimously resolved that the issue will be seriously dealt snake-on (similar to head-on) and no stone will be left unturned (even in case the snake is hiding behind a stone) to deal with the issue. A very pro-active family indeed!

*****

As the financial markets evolved very rapidly in the 1990s, and the importance of "Risk Management" dawned on the regulators and bankers all over the world, lot of changes took place in the financial system. Basel Committee resolutions and followup actions resulted in the implementation of "Prudential Norms" and enhanced monitoring tools for maintaining health of the financial system. Bankers all over the world started hearing about wonderful terms like "Income Recognition", "Asset Classification", "Off-site Surveillance"  and "Too Big To Fail (TBTF)" and so on.

Bankers started hearing and discussing about "Market Risk", "Credit Risk", "Interest Rate Risk", and so many other risks. During the late 1990s, interbank call money market interest rates surged, especially around reporting Fridays, to absurd levels. These are short term borrowings, often for one day known as "Overnight Money" between banks to tide over short term liquidity issues. At one point the rates crossed 200 per cent in over heated markets. The principle of "Dam Dupat" (a Hindu law concept that at any point in time interest payable cannot exceed the principle amount - दाम डुपट्ट) became a laughing stock. The impact of Asset-Liability Mismatch Risk came into sharper focus,

Computerisation was in the initial stages and non-existent at branch level. Hence workforce at branch level had to be trained to manually calculate cash flows in deposits and advances by distribution of assets and liabilities in "Time Buckets". There were many training programs, including on-location programs, to reach out to the branch level workers. Those in the training system did overtime work in conducting such programs.

*****

As one of my highly respected Professor colleague and mentor used to repeatedly say, most of the aircraft accidents take place during take-off or landing, and similarly teaching or training session fall flat at the stage of introduction of the subject or while summarising the session learning points. As a trainer in these risk management program sessions I had thought of and used the above story of "Three Houses and Two Snakes" to introduce the concept of risk.

In the above story, the three houses represent the three type of institutions. Snake represents a risk and response of the residents represents risk management responses.

• House Number 1 represents institutions which do not know that there is a risk element in the system. Life goes on fine until the risk strikes and the institution gets into deep trouble.
• House Number 2 represents institutions which worry about non-existent risks and see a risk everywhere, without actually doing anything about them. They fail to grow because of such attitude.
• House Number 3 represents institutions that have actual risks, but are also aware of its existence. They take action, falter in the beginning, but ultimately evolve sound Risk Management Framework.

This story, with the humour part in place, would help drawing the attention of all participants to further eloberate on the basic issues of identifying the risks, measuring the risks and managing the risks. It was even more so, because it would be the first actual training session after the long inaugural session and speeches of the dignitaries.

*****

Reserve Bank of India Governor's speech last week about mindless pursuit of bottom line by banks and risks of a heavy unsecured loans exposure reminded of the early days of risk management evolution in banks. Please CLICK HERE for further details on it.

I had used this story in training sessions in the bank's in-house training programs in 1997. Of course, Nagaraja's name was not in reference as he died in 2017. Some twenty years later, I was sitting in a training session as a observer for evaluation of faculty in a great institution that trained future bankers. It was a thrill to see that the faculty used the story to introduce the concept of risk and risk management.